$250,000 A Year Doesn

$250,000 A Year Doesn’t Translate Into Being ‘Rich’ Anymore

The catastrophe which is overtaking the Japanese culture and society has also been slowly creeping up on the US. The insidious nature of this depressive, destructive social dynamic is rooted in a desire to ZIRP things down as much as humanly possible and thus, ‘survive’. Those who have a hand on the true levers of power, that is, the importers and political powerful, thrive and increase their wealth and political power (note all the billionaires running our government) while encouraging the populace to believe that zero interest and zero growth is perfectly fine.

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ΩΩThis is coupled with various insidious forms of very real inflation. For example, I still pay for my son’s health insurance because he is in college. It just jumped by $70 a month. OUCH. My own health insurance jumped, too. This hammers my own finances since we are on a fixed income. Healthcare, food and fuel all have gone up tremendously since 2000 and incomes have fallen. Millions of people grasp at straws hoping to overcome these serious inflationary forces via getting cheaper and cheaper debt.

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ΩΩMoney creation carries virtually no penalties, yet wages continue to fall. Why is this and how is this destroying the social fabric? Pertinent questions! Krugman and his Keynesian associates think that the road to reviving our economy is to borrow nearly infinite sums of money which has cheap interest rates. But every infusion of ‘money’ into the system in this fashion has boomeranged in vital areas, namely, healthcare costs, price of food and fuel. As well as local taxes. Federal taxes are slated to jump back to 1999 levels as the ridiculous tax cuts sunset.

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ΩΩAfter destroying our economy, the rats who saved their Goldman Sachs brethren are now jumping ship: Top White House Economic Adviser to Depart – NYTimes.com. Summers has faded into Fall as a Winter of tremendous discontent looms. I have spent a lot of time during the last two weeks getting ready for winter. I barely have any firewood in the storage area and have to get hopping to assemble at least 4 cords of split wood or I will die of the cold since I can’t access other forms of fuel. Since I have trees, I go forth and find what I need here on my own property.

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ΩΩSummers is an elitist who went to elite schools, worked for the same pirates who are steadily looting our nation, destroying our nationalist banking system, who enabled and expanded pirate coves run by the British Crown so as to avoid paying taxes and of course, charged all of their blasted AIG default deals to the US taxpayers and our central bank. Good riddance to all the rats who tried their best to maintain the destructive international banking status quo! Who will replace these clowns? We don’t honestly know, yet. Obama is desperate to save himself and his AIPAC party. But incapable of engineering the obvious reforms such as killing off AIPAC and other leeches and cleaning up Congress. So failure looms for the Democrats as the GOP gets shoved further to the far right just as Israel and Japan are heading in the same fascistic direction.

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Wall Street Journal : Incomes continue to drop

The data, released Thursday, underscore the extent to which U.S. households relied on government benefits—and each other—to weather the recession and how living standards at the middle of the middle class have stalled. The report comes as the economy is at the center of a vigorous debate over how government policy can best help the poor and unemployed….The median household income fell 0.7% to $49,777 in 2009, down 4.2% since 2007, when the recession started, the Census Bureau said.

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The bureau said that the drop in income in the recent recession, so far, wasn’t much different from those recorded in the early 1990s and early 2000s recessions, and was actually smaller than the 6% drop recorded in the deep recession of the early 1980s.

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But there is a difference this time: In the prior three recessions, incomes fell after years of upswing, then resumed growing once the downturn ended. The decline this time comes on top of a long period in which incomes stagnated even through the recovery of 2003 to 2007.

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ΩΩIn previous eras, the US balance of trade was relatively smaller than from 2000-2010. It was a smaller percentage of our GDP and smaller in total size. It is now a major mover within our domestic markets and imports dominate our industrial consumption of goods. It is also why we don’t have lots of inflation: US dollars are not remaining here but move instantly overseas after it is created as debt here in the US! So half of US dollar creation has moved overseas since Reagan and the ratio gets worse and worse every ten years even as we have a slowdown here at home.

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ΩΩFor example, to revive the US auto industry, an outright gift of $4,500 was handed out to car buyers who were then allowed to spend more than HALF of this bounty on foreign autos! This was totally insane and put our government deeper into debt to foreign powers in two key ways: we had to sell this debt to their governments who aim to use this as leverage to keep our trade imbalance going in their favor and the profits from these public-financed auto sales went overseas, as well and our trade deficit grew worse quite suddenly! Overall, a total losing proposition. And one that was ignored which is why we are going bankrupt instead of pulling out of a bad economic ditch.

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ΩΩWhile I was offline or working insane hours trying to get ready for winter (thanks to using primitive fuel sources due to inflation), the liberal side of the web was all outraged over this article written by a law professor at the University of Chicago. The rage shown to poor professor Henderson was comical as well as cynical in that no one analyzed what is going wrong here. Namely, even the top, treasured professions are being eaten alive by ongoing inflation, collapse in the utility of public services especially the collapse of our school systems and the huge overhead of accumulated debts especially school and housing debts. Instead of analyzing this in view of how the flood of easy trade-generated credit caused the principal balance of everything to shoot upwards as true inflation roared like crazy while seemingly hidden by cheap imports, most commentators simply reflexively attack this poor professor who has ‘wealth’ but little comfort from high wages.

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We are the Super Rich « Truth on the Market

The biggest expense for us is financing government. Last year, my wife and I paid nearly $100,000 in federal and state taxes, not even including sales and other taxes. This amount is so high because we can’t afford fancy accountants and lawyers to help us evade taxes and we are penalized by the tax code because we choose to be married and we both work outside the home. (If my wife and I divorced or were never married, the government would write us a check for tens of thousands of dollars. Talk about perverse incentives.)

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Our next biggest expense, like most people, is our mortgage. Homes near our work in Chicago aren’t cheap and we do not have friends who were willing to help us finance the deal. We chose to invest in the University community and renovate and old property, but we did so at an inopportune time.

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We pay about $15,000 in property taxes, about half of which goes to fund public education in Chicago. Since we care the education of our three children, this means we also have to pay to send them to private school. My wife has school loans of nearly $250,000 and I do too, although becoming a lawyer is significantly cheaper. We try to invest in our retirement by putting some money in the stock market, something that these days sounds like a patriotic act. Our account isn’t worth much, and is worth a lot less than it used to be….

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…6. Our family income is not anything close to $455,000 or the like, and if our taxes go up (something I’m fairly certain will happen if the president has his way), we will have to cut back on our expenses, and this will put small businesses behind. That was my only point. I don’t feel entitled to anything. I am not as spoiled a brat as people seem to believe.

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ΩΩThe professor is totally correct here! His many critics are totally wrong. Yes, people live on very limited incomes now exactly like in the UK or Japan. The deadly ZIRP system is a depression system which depresses WAGES. Hitherto, for about 35 years, we overcame this depressive force via the simple action of dropping the cost of most things we buy in appliances, cars and consumer goods by importing cheap labor goods at an insane pace. But the cost of nearly everything domestic in nature shot upwards at the same speed and degree as our trade deficit.

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ΩΩThat is, back in 1979, I could buy in Park Slope, NY, an entire brownstone for only $39,000. I know people very well who have recently bought one quarter of the space (that is, only one floor versus my own 4 floors back then) for $350,000+ on the same block in 2006. Wow! This represents a big profit for anyone selling a home bought back in 1979 but is a huge overhang of debt that isn’t merely ten times bigger than what I paid but is forty times greater since it buys one quarter of what I could buy back then. This is a huge problem for the present generation of buyers!

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ΩΩI paid 9.45% interest on my original loan and paid off the principal in virtually no time at all, less than 15 years. People buying the same building at $1,480,000 with only 3.75% interest have this immense principal balance to pay off which towers over their incomes in ways that I would greatly dislike if I were trying to buy a home today. The monthly payments may be similar but the debt isn’t for 15 years, it is for either 30+ years or even infinity (no principal is ever paid off, for example). The people who flooded the markets and bid up housing during the boom years increased the debt overhang tremendously and many of them did this while planning to never pay off any principal at all but rather, to turn over the building later and keep the debt ball rolling uphill. Of course, it is now falling and so the ability to evade this principal overhang is impossible anymore and so people are being bankrupted rapidly.

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ΩΩProf. Henderson bought a home when prices were inflated thanks to easy credit, low interest rates coupled with all rival buyers able to evade paying even one penny of downpayment or principal on the loans. This hurts him greatly, financially, and is part of his understandable discontent. His residence is no longer enhancing his wealth ratio, it is actively harming it. And he had to bid very high on a house in order to get into a safe neighborhood. Crime and housing values go hand in glove. When I bought my brownstone so cheaply in 1979, the crime rate on my block was rather high. Three murders in one month, for example. I spent most of my time fighting criminals (very successfully!) rather than working on my brownstone.

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ΩΩI used to argue with Brad a lot before he yelled at me to stop talking about Japan. He thinks China is a problem but Japan is our good buddy rather than a harbinger to the horrors of depression taking root here. Brad loved attacking his fellow well-padded professor. Brad DeLong said in reply to Bridget C…

Re: One has to wonder if the author understands the tax proposal he is talking about? If it is true that he only makes a little bit over $250,000, his taxes wont change by much…

. With $50K/year in mortgage interest on a $1M 4700 sq ft house, $15K in property taxes, $10K in state income taxes, $15K in employer health benefits, and other assorted deductions and exemptions, he wont pay an extra penny unless his household income is somewhere north of $350K/year…

. Brad DeLong

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ΩΩ$50,000 a year in mortgage INTEREST? And what horror is this? I bought a fine mansion, a historic mansion in pretty good condition in a upper middle class community in NJ, one of the most expensive states in America, for only $128,000 in the height of the high interest era in 1983. Paid cash for it. It was four stories, had 8 bedrooms, two kitchens, a brick two story carriage house, etc. A fine house with many carved pillars. This poor professor in Chicago is stuck paying more than I paid for my NYC brownstone as interest on a $million+ loan for a substantially smaller and less prestigious house? Wow! I would be royally pissed off if I were him!

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ΩΩIn just two and a half years, Prof. Henderson paid for my mansion! That is, the money pouring out of his pockets could have bought over 3 mansions in just 10 years! Talk about an insane drain on his finances! I find this intolerable. On top of this, the professor has to send his children to a private school. All schools have seen raging inflation alongside housing and of course, the more expensive his housing became due to the flood of easy lending, the higher his school taxes. Yet, as I well know since I was forced to use private schools while in NYC (and this cost was greater than ANYTHING I was paying for back then including my mortgage!) is due to the collapse of public schooling as discipline collapses and schools force studious children to learn alongside children who are bent on destroying themselves and society.

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ΩΩI sympathize with this professor. Back in 1978, I founded ‘Save Our Schools’ in NYC. It was a total failure. The teacher’s union hated my guts, the Bored With Education bureaucrats wanted me to be killed by muggers and the Daily News used to cover my travails as I tried and tried to move that behemoth from sluggish passivity to some sort of action. I can give many examples!

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ΩΩFor example, a student at the John Jay High School in Brooklyn (aka: The Rikers Island Holding Pen) shot at a lady walking her baby. He shot from a school room window! I marched to the school and demanded to see the principal. ’What is the matter? We had a good year here! Why are you complaining? We had only 2 murders in the hallways!’ he told me. My jaw hit the floor and I immediately called the Daily News and put this principal on the hot seat. Another school couldn’t open on the first day of school because a drug dealer was shot in the doorway and his corpse blocked the entrance.

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ΩΩA parent calle me and I showed up and expressed greatest rage (I yelled a lot while pointing at things). I called the head of the school district and he said, ‘Write me a letter’. I yelled, ‘Get over here NOW or else.’ He laughed and said, ‘You can’t make me do anything’. It was like pushing rocks uphill, trying to get things done and I said, many years ago, the last thing we shall ever reform is our school systems. Presently, these are funded via property taxes and the sudden housing value surge has hammered people when it comes to taxes. I sold my houses in NJ because of looming tax bites due to rising house values. Here, in NY, I pay thousands of dollars in school taxes and it is a huge part of my income.

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ΩΩProfessor Henderson is caught in this trap. His wife owes the equivalent of the price of a mansion circa 1989, for her education. This is like paying off more than one house! And so we have a double income family, instead of swimming in the easy pool are actually drowning in debt. In 1964, my parents could buy a fine 7 bedroom house on the ‘nice side of town’ in Tucson and we went to the best public schools and could own three cars and have half a dozen teenagers, not just three children, and my mother didn’t have to work, either! All of this, mostly cash! Not borrowed funds.

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ΩΩToday, it is a ‘all debts all the time’ world and few Americans whether earning only $20,000 or $200,000 can feel free of the undertow of too much debt or too little funds for a normal life. That is, thanks to insidious forms of inflation devaluing money, a $30,000 income in 1964 was better than a $300,000 income today in how we could live.

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Op-Ed Columnist – The Angry Rich and Taxes – NYTimes.com

Yet if you want to find real political rage — the kind of rage that makes people compare President Obama to Hitler, or accuse him of treason — you won’t find it among these suffering Americans. You’ll find it instead among the very privileged, people who don’t have to worry about losing their jobs, their homes, or their health insurance, but who are outraged, outraged, at the thought of paying modestly higher taxes….At the same time, self-pity among the privileged has become acceptable, even fashionable.

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ΩΩThanks to never indexing the income tax to inflation, as the value of the dollar nosedives, people are pushed into higher and higher tax brackets even as they are not seeing much material improvement when given pay raises. Since no-money-down loans drove up the price of housing to ridiculous levels, people who owe immense principal balances are terrified of not being able to pay for the loans especially since they can’t sell their homes all that easily. Everyone is outraged about taxes because as they struggle to run ahead of Inflation who has divine wings and can’t be caught, they see ever-bigger sums of money required for ‘a normal life’ and this is understandably scary! This is why the cure for inflation, flooding the US with foreign goods, is so insidious: it masked domestic inflation which is pretty bad.

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ΩΩAnd worse, to fix this, illegal aliens were used to drive down wages. Prof. Henderson mentions how his lawn care and maid are both aliens who, I must note, came here and were hired because they were cheaper than native citizen labor. No one in the US wants to pay higher taxes because inflation has eroded civic responsibility and worse, the ZIRP lending system means governments can merrily overspend and pay a barely nominal interest on rolling loans that never pay off any principal at all. Ever. There is only one ending: it gets way too big and causes national bankruptcy.

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ΩΩWay back when Nixon was President, we all fretted about balancing the budget and inflation. Thanks to the queer ZIRP system which sits like a hen on her inflationary eggs, hides true inflation while letting it rage unchecked in specific theaters, we have social discontent on all levels: the liberals want more debts because it is cheap and the conservatives want more debts in order to expand our grossly overextended empire. Both Japan and England show us what is going to happen next to America and both Brad Setser, Krugman and Henderson cannot understand or conceive how terrible it is going to get in the future.

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ΩΩNamely, when reading comments from people who are angry at ‘rich’ (but deep in debt) people, there are two threads: ‘I can’t have three children while working, I can’t afford it—so Henderson was a fool to venture doing this’….and, ‘I wish we had more free money via lending so I can live better’. The wish to have a normal family life which was considered natural for a ‘middle class’ circa 1980 is now a LUXURY just as it is now in Japan, a land with fewer and fewer intact families with most births in the underclass which barely survives mostly on government hand-outs or by dumping the children into the streets.

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ΩΩHere is some English news: Liberal Democrat conference: Vince Cable turns his guns on home owners – Telegraph

Middle-class home owners would pay higher taxes under radical plans outlined by Vince Cable, the Liberal Democrat Business Secretary.

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ΩΩTaxes on the middle class double earners in the US will rise, too. It is inevitable. This is a classic way to engineer a revolution. Peasant revolutions begin outside of cities. But the more dangerous revolutions rise up within the Burg. England, Japan and the US have decimated the ‘peasant’ class but the ‘middle class’ is a teeming mass that surrounds all cities and when, on the march, can effect very sudden changes due to being ultimately in control of the police.

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British Isles ‘worst place to live in Europe’ – Telegraph

This year it has jumped above Ireland but in some respects Britons are now faring worse than residents of other countries. Britain now has the fourth-highest retirement age of any country – averaging 63.1 years – and is set to rise still higher. Net household income after tax, at £37,172 a year, is now lower than the amount earned in Ireland, the Netherlands and Denmark.

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This is likely to fall still further when VAT rises to 20 per cent in the New Year, while public services will suffer following next month’s Comprehensive Spending Review, which will lead to budget cuts of up to 40 per cent in some Whitehall departments.

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France and Spain again topped the quality of life index, as workers there have more paid holidays, earlier retirement, lower prices, longer life expectancy and more sunshine.

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ΩΩA 20% VAT will hammer the consumers of the middle class. They will justifiably feel much poorer! They are also under siege from idle youth due to the underclasses dumping their children into the streets. The police there have put up a challenge to the subject of Queen Elizabeth, namely, they will cheerfully suppress the population if they revolt but only if the Queen’s representatives in Parliament pay them enough to do this dirty fighting: Police: we can’t take care of cuts protests if you cut us | UK news | The Guardian

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ΩΩAll revolutions begin with the police refusing to stop angry mobs seeking to sack politicians or behead Queens. Right now, the police are simply showing less and less interest in patrolling the streets or protecting the middle class (since the dawn of civilization, the police sort of business is all about suppressing peasants and poor within cities!) and this, in turn, is causing a rise in fear and loathing in the middle class: Police give up the fight as yobs take over – Telegraph

“We all want civility restored to society and the public rely heavily on the police to help this happen. But the police cannot do this on their own,” says Sir Denis. “The public won’t tackle anti-social behaviour on the streets while they fear reprisals.

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“Perpetrators need to know they are wrecking lives, the results can be tragic and that they will get swift action from the authorities if the public call for help.” Earlier this year, Sir Denis disclosed that just one in 10 police officers was free to tackle crime at any given time because the vast majority were either off work or tied up on other duties.

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ΩΩ90% of the police are busy doing things that brings little to no benefits to the taxpayers and middle class. They have to make money for the government so they set up business so they can fine or ticket people who have money which is the middle class, they can’t make money off of poor yobs going nuts in public. It costs the city money to deal with them. All civilizations fall when the police and municipal governments focus nearly entirely on looting or tripping up or taxing the middle classes. The reaction to this is for the middle class to go into open warfare with the underclasses or in extraordinary times such as the French and American revolutions, the middle class is joined by the lower classes and both turn on their masters.

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ΩΩWe shall see what will happen here, next. I seriously doubt the middle classes will join with the lower classes this time around. And this is why ‘liberalism’ is going downwards at an increasing speed. Understanding how the middle class is vital to political health is key to future survival as a political force for the middle class vacillates between supporting liberalism and running off to conservative power in a pendulum that goes back and forth. In this editorial, a liberal proves pretty clueless as to why the middle classes are abandoning his form of internationalism: Jonathan M. Feldman: Why the Swedish Left Lost

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ΩΩAll over Europe, people are increasingly concerned about foreigners infiltrating and destroying their cultures, languages and taking over industries and buying land, etc. This fear is not unreasonable and the liberal cure being offered is, ‘Shut up and go away, you stupid middle class people!’ Across the board, people complain about their children going to school where most of the students don’t speak the native language or are ‘street kids’ who have little supervision or discipline. This is a force that should not be ignored! The need to retract and retreat and regroup is growing, not internationalist feel good pleasures! The wheel turns to the right and this doesn’t surprise me in the slightest: it is a time for protectionism, not open doors.